Financial Risk Manager Part 2

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Q-118. Which of the following risks is specifically recognized by the incremental risk charge (IRC)?

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A

Expected shortfall risk, because it is important to understand the amount of loss potential in the tail.

B

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Jump-to-default risk, as measured by 99.9% VaR, because a default could cause a significant loss for the bank.

C

Equity price risk, because a change in market prices could materially impact mark-to-market accounting for risk.

D

Interest rate risk, as measured by 97.5% expected shortfall, because an increase in interest rates could cause a significant loss for the bank.

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